Hong Kong Exchange to Launch SPAC Listing, IPO at Minimum $130 Million
24th September 2021 | Hong Kong
The Stock Exchange of Hong Kong has published a 45-day consultation paper on SPAC listing framework, including fund-raising minimum size of at least $129 million (HKD 1 billion). If a SPAC is unable to announce a De-SPAC Transaction within 24 months, or complete one within 36 months, the SPAC must liquidate and return 100% of the funds it raised (plus accrued interest) to its shareholders. The Exchange will then de-list the SPAC. The deadline for responses to the public consultation is 31 October 2021. Interested parties are encouraged to respond to the Consultation Paper by completing and submitting the survey on the HKEX website. (IPO ~ Initial Public Offering) – The Consultation Paper Survey | HK SPAC Consultation Paper
“ Hong Kong Exchange to Launch SPAC Listing, IPO at Minimum $130 Million “
SPAC ~ Special Purpose Acquisition Companies. A SPAC is a type of shell company that raises funds through its listing for the purpose of acquiring a business (a De-SPAC Target) at a later stage (a De-SPAC Transaction) within a pre-defined time period after listing.
Summary of Hong Kong SPAC Listing
Pre De-SPAC Transaction Proposals:
- Investor Suitability: the subscription for and trading of a SPAC’s securities would be restricted to professional investors only. This restriction would not apply to the trading of the Successor Company shares post the De-SPAC Transaction;
- SPAC Promoters: SPAC Promoters must meet suitability and eligibility requirements, and each SPAC must have at least one SPAC Promoter which is an SFC licensed firm holding at least 10 per cent of the Promoter Shares;
- Dilution Cap: Promoter Shares are proposed to be capped at a maximum of 30 per cent of the total number of all shares in issue as at the initial offering date; and a similar 30 per cent cap on dilution from the exercise of warrants is also proposed; and
- Fund Raising Size: the funds expected to be raised by a SPAC from its initial offering must be at least HKD 1 billion.
De-SPAC Transaction Proposals:
- Application of New Listing Requirements: a Successor Company must meet all new listing requirements (including minimum market capitalisation requirements and financial eligibility tests);
- Independent Third Party Investment: this would be mandatory and must constitute at least 15 to 25 per cent of the expected market capitalisation of the Successor Company, validating the valuation of the Successor Company;
- Shareholder Vote: a De-SPAC Transaction must be approved by SPAC shareholders at a general meeting (which would exclude the SPAC Promoter and other shareholders with a material interest); and
- Redemption Option: SPAC shareholders must be given the option to redeem their shares prior to: a De-SPAC Transaction; a change in SPAC Promoter; and any extension to the deadline for finding a suitable De-SPAC Target.
Liquidation and De-listing:
Return of Funds to Shareholders: if a SPAC is unable to announce a De-SPAC Transaction within 24 months, or complete one within 36 months, the SPAC must liquidate and return 100 per cent of the funds it raised (plus accrued interest) to its shareholders. The Exchange will then de-list the SPAC.
HKEX Head of Listing, Bonnie Y Chan:
“As Asia’s premier global listing market, HKEX is always looking for ways to enhance its listing framework, striking the right balance between delivering appropriate investor protections, market quality and market attractiveness. We believe the introduction of a Hong Kong SPAC listing framework will provide another attractive route to listing in Hong Kong, allowing more companies from Greater China, Southeast Asia and beyond to seek a listing on HKEX.
To maintain Hong Kong’s reputation for high quality listings and stable secondary trading, safeguards are included in our SPAC listings proposals, which are designed to welcome experienced and reputable SPAC Promoters that seek good quality De-SPAC Targets.”
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Hong Kong Exchanges and Clearing Limited (HKEX) is one of the world’s major exchange groups, and operates a range of equity, commodity, fixed income and currency markets. HKEX is the world’s leading IPO market and as Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, it is uniquely placed to offer regional and international investors access to Asia’s most vibrant markets.
HKEX is also the global leader in metals trading, through its wholly owned subsidiaries, The London Metal Exchange (LME) and LME Clear Limited. This commodity franchise was further enhanced with the launch of Qianhai Mercantile Exchange (QME), in China, in 2018.
HKEX launched the pioneering Shanghai-Hong Kong Stock Connect programme in 2014, further expanded with the launch of Shenzhen Connect in 2016, and the launch of Bond Connect in 2017.
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